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4 Period Moving Average In A Nutshell
The perks of being able to navigate the short term is that you can easily begin to read the movements and when they get to far from the short term moving average, you could look for a quick sell or buy, depending on the direction. Another perk is that you will get a feel for every bump in the road and can make a quick decision to capture the short term news play or technical analysis that could indicate a quick move. If a gap up or down were to occur, this could be a good way to gauge where the market average is in the short term.
Some of the disadvantages are that it will not be a good tool for people who are long term investors. The simple reason is it does not include enough data to give you a reliable long term opinion. Secondly, it does pick up many of the day to day movements which may not be of interest to many investors. Lastly, it does not represent the company as a whole and what it is capable average wise. Taking only a short set of data will not give you the well rounded marks needed to make money in the long term.
There are many different moving averages and for this one, we are going to take a look at the 4 period moving average. The 4 period moving average simply takes a look at the four periods previous to give you an average line. This type of moving average is quick and does not give you a whole lot of data for the person that is investing long term. However, if you are a day trader or an extremely short term investor, this could help you navigate the more volatile markets.
Closer Look at 4 Period Moving Average
Be sure to play with the moving average on a demo account and decide if this is the right fit for your investing and trading needs. Certainly you can change the distance of the moving average, but this specific example includes the 4 period moving average. Be sure to read about how the tool and data points work and if you still have questions, reach out to an investing community and bounce ideas off one another to help narrow you selection.